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Turkiye deals a strong blow to the Israel economy

May 8, 2024 at 2:36 pm

Turkish President Recep Tayyip Erdogan speaks at opening ceremony of 201 restored works at Bestepe National Convention and Culture Centre in Ankara, Turkiye on May 06, 2024 [Muhammed Selim Korkutata – Anadolu Agency]

Since the beginning of the barbaric war on the Gaza Strip, many believe that the Turkish position did not live up to the level they had hoped for and, over time, the voices of President Recep Tayyip Erdogan’s fans grew louder, demanding more decisive measures to be taken with the Occupying state. The constant response was that Turkiye did and provide everything it could, based on the circumstances of the current stage locally and internationally, especially since Turkiye has taken several gradual decisions since the outbreak of the war in October of last year.

The truth is that Turkiye’s recent decision to completely suspend its trade with Israel came late and, regardless of it being an adjustment in course after the ruling party’s major loss in the local elections, it did reveal that there are more decisive steps that could be taken to deter Zionist barbarism, and that fans of the Turkish regime were offering genuine advice that expresses the feelings of large groups of the Turkish masses who have long supported the President at the ballot boxes in many previous elections. They showed that those with the loud voices confused the decision-maker and caused a major electoral defeat for the ruling party. Perhaps that harsh lesson will be useful to both sides, those who constantly chant and praise the regimes and for the regimes who swallow those chants and praise without a more in-depth reading of the feelings of the broad masses, which causes them to later get into trouble.

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It is worth noting, in this context, that the Turkish regime has already taken some measures to punish the Zionist entity, as with the outbreak of war, Turkish Airways stopped flights to Israel and, in the same month, Turkish-Israeli cooperation in the field of energy was suspended, while a previously scheduled Turkish ministerial visit to Tel Aviv was cancelled.

Last January, Turkiye excluded Israel from the targeted export destinations while lifting support for companies exporting to Israel. The strongest decisions came in April when Turkiye restricted the export of 54 goods to Israel and required the immediate cessation of its aggression against the Gaza Strip to lift the restrictions. The ban included the export of aircraft fuel, iron for construction, flat steel, marble, ceramic, etc.

This was followed by the latest official decision to announce the severance of all trade relations with Israel, and Turkish Trade Minister, Omer Bolat, confirmed that relations will not be resumed until a permanent ceasefire was secured in Gaza and the unhindered flow of humanitarian aid to the Palestinians there was achieved. Thus, Turkiye would be the first of Israel’s main trading partners to stop exports to and imports from it due to its war on Gaza.

It is worth noting here that, for the first time, we are seeing political differences affecting trade. Turkiye signed many trade agreements with Israel before the Justice and Development Party rose to power and, after its rise to power, it also signed many new agreements that led to the escalation of economic relations between them, making them major trade partners. The two parties were keen to keep these relations separate from the political differences between them, and this was evident in the increase in trade numbers between them, despite the political rift that followed the Israeli attack on the Mavi Marmara ship in 2010, with Turkish exports continuing to rise continuously despite the ongoing political clashes over the past period.

According to the trade balance figures between the two countries, Turkiye exported products to Israel worth more than $5.4 billion, with Israel ranking 13 in the list of countries that import the most Turkish products in 2023, forming 2.1 per cent of total Turkish exports. Ankara’s most important exports to Israel were steel, vehicles, plastic, electrical appliances and machinery, while fuel dominated imports, at a cost of $634 million last year.

These numbers reflect the difficulty Turkiye had in making this decision, as many Turkish companies that had export contracts and produced those orders will be harmed. Turkish officials expressed this by stressing that certain economic loss was a small price for the humanitarian gains. Erdogan also stressed that Turkiye is willing to pay the price for this decision at the global level.

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It is certain that the critical condition of the Turkish economy is one of the main reasons that delayed this decision from being made earlier, especially in light of the worsening inflation crisis, which almost reached 70 per cent at the end of last April, and the continued decline in the exchange rate of the lira, which the Turkish Central Bank expects to slide to 40 liras per dollar by the end of this year, compared to only 32.5 liras currently.

The Turkish administration was relying heavily on the increase in exports to pay part of the foreign obligations that caused the lira to decline over the past three years, but with the decision to suspend trade with Israel, and according to the Turkiye Exporters Assembly, the government will have to reduce export targets for the end of the year to $260 billion instead of $267 billion, unless trade with Israel resumes within two months.

Although the losses of the Turkish economy may also extend to legal compensation that companies are forced to pay if Israeli companies resort to international courts, it is certain that Israel’s losses will be large as a result of the Turkish decision, especially since important Israeli sectors depend on commercial imports in very large percentages. At the forefront is the construction sector, which imports approximately 70 per cent of its steel and cement needs from Turkiye and is the sector that suffers the most after the unlawful war on the Gaza Strip.

The Turkish decisions will also cause more suffering to the entire Israeli economy considering the difficulty of compensating for these imports in the short term. If an agreement is reached with new companies from other countries, import costs will certainly rise compared to the Turkish product, which enjoys a lower shipping cost as a result of geographical proximity, in addition to Its global competitive advantages. This was confirmed by the American investment bank, JP Morgan, which said that the halt may marginally raise price pressures for goods in Israel in the short term.

Also, among the Israeli losses, according to the New York Times, is the fact that Turkiye’s announced suspension of all forms of trade with Israel may only be the latest in a series that makes Israel’s isolation greater than it was over the past few months. It also noted that this decision may encourage other countries to take similar steps. This was confirmed by Erdogan by saying that he believes this will be an example for other countries that are dissatisfied with the current situation.

There is no doubt that the latest Turkish step is worthy of welcome, even if it comes late, especially since the Turkish economy will suffer significant losses during the difficult times it is going through. This is regardless of whether companies bypass the decision by exporting through intermediaries in other countries or not, and whether there was talk about having to change positions following the results of the recent elections. It is still necessary to praise the decision and acknowledge that it is an unprecedented and historic decision and to note that the Arab and Islamic nations are eager for similar decisions to follow soon.

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This article appeared in Arabic in Al-Araby  on 7 May, 2024.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.